The state of Alabama says it isn’t going to pay J.P. Morgan Chase & Co. any money it allegedly owes under an interest rate swap deal between its school authority and the bank. The swap was apparently part of a bond issue deal put together for the Alabama Public School & College Authority. The state says the deal wasn’t lawful under state law and is asking the U.S. federal court in Montgomery to rescind the contract.

The state's threat to refuse to pay has raised concerns with bond rating services. S&P has put th PSCA on a negative credit watch.